Rethinking Unemployment in the Age of Automation

In my last article concerning the impact of automation and robotics on human employment, I asserted that commercial job loss is more a result of automation than outsourcing. Also, I asserted that this trend was going to continue at an accelerated rate. I said we need to address three areas of concern to mitigate the impact:

In this installment, I am going to look at income—specifically, the need to rethink how we approach unemployment insurance.

Let me share a piece of personal information with you. A while back I lost a gig and was eligible for unemployment benefits. The amount I was eligible to receive back in 2012 was $300 a week. (Today, the maximum benefit is $450 a week for up to 26 weeks.) In the scheme of things that’s not much money. In a major metropolitan area such as Los Angeles, $1,200 a month does not even cover my housing costs. Luckily, I was able to get another gig in no time at all. But, I am a tech worker. Others are not so lucky.

Unemployment benefit in California is calculated by using the following formula:

highest quarterly earnings/25

Thus, the average programmer makes around $75,000 a year, which comes out to $18,750 a quarter. So doing the math:

$18,750/25 = $750 a week

But that $750 number exceeds the maximum allowance. So, if you are a programmer who has been “let go” in California, the most you’ll get is $450. Also, any benefit you receive is subject to income tax. If you find a part-time job to make up the difference, your benefit will be reduced.

The calculation is not special to California. Arkansas is pretty much the same. In Texas you get a little more.

If you are accustomed to making $75,000, which after taxes is about $1,100 a week, making ends meet on $450 pre-tax dollars is going to be a stretch.

This is not a pretty picture in a few ways. First, there is the built-in incentive to not work legally. You are not encouraged to use your creativity to launch your own business. Forfeiting earned money does not encourage you to take on small jobs that allow a company to get to know you. (Try and buy has led to many a full-time position.) So what do you do? You go into the shadow economy. You work under the table: Have the check made out to your wife on her W9 or have it show up on Paypal as a gift. Is the practice shady? Yes. Is it necessary? Yep, particularly as the end of the month rolls around.

Now, if you are in a major city such as New York, San Francisco or Los Angeles and you are in prime employment age, between 25 and 45 years old, getting another tech job quickly is usually not a problem, provided you know what you are doing. But, what do you do if you are a 50-year-old Visual Basic programmer in Glen Falls, New York, with two kids still in high school and a housing market that is anemic? You just can’t get up and move. And, learning programing technology is going to take time. Now, imagine the same scenario, only this time you work in a small furniture factory in Alabama and your job lathing table legs has just been replaced by a robotic CNC machine. The picture is now a nightmare.

So, what do we do?

I am a supporter of the notion of Universal Basic Income (UBI). UBI is a system in which citizens of a given nation are provided with enough basic income to meet the essentials of life. Typical in just about all the plans for UBI is the stipulation that there are no strings attached. Under UBI, if you want make more money you can. Your UBI allowance is not decreased. UBI can be more about developing your value in society rather than living off the dole.

Still, I am a realist. I am not of the belief that one day a magic wand will be waved over state and the national capitals, that politicians will come to their senses and amazingly we will have UBI. Big change does not work that way unless something gets blown up (Think Pearl Harbor and 9/11). I am of the thinking that when it comes to large-scale change, the best thing to do is focus on one thing. For me, that one thing is to eliminate the “payback” clause in unemployment benefit policy.

Given that many, if not most, jobs will be automated before the end of the century, the notion that unemployment is a benefit that tides us over until the next job comes along is outdated. There might not be any next job. Rather, unemployment might be a time to reinvent ourselves. Reinvention means using the unemployment benefit as a baseline of income upon which we can build more income. We should not be penalized for making money on top of the unemployment benefit. Rather, the benefit needs to be a subsidy from which greater income grows. Once a livable level of income is achieved and a trajectory of reliable, personal revenue is established, we can revisit the size and limit of the benefit allowance. Until that time, the allowance remains in place.

Think of eliminating the “payback” clause as training wheels for full UBI. Removing the ““payback” clause in unemployment benefit policy is a concrete first step to having realistic policies about labor and income in the Age of Full Automation. The legislative debate and public education that will happen in the course of eliminating the “payback” clause of unemployment insurance will put Universal Basic Income on the social and political agenda.

As I mentioned in the previous article, using automation to replace human labor is nothing new. But, what is new is the rate at which the human labor is being replaced. If we do not start implementing concrete ways to address the long-term ramifications that result from the ongoing elimination of human labor from the commercial landscape, the storming of the Bastille in 1789, the bread riots of 1863 in the southern United States and the removal of the Bonus Army from Washington, D.C., in 1932 will look like a warmup act for what might very well transpire. Removing the “payback” clause from current unemployment benefit policy is but a small step toward addressing the issue at hand. However, put a lot of small, achievable steps together and after a while you’ve made significant progress solving a big problem.

So here is something we can do.

Take 15 minutes out of your day to copy the following and send it to your local and state representatives as well as your representative in Congress:

Dear Representative _____________ Please initiate legislation immediately to remove the practice of deducting money earned while receiving unemployment benefits from a recipient’s payment. Also, make it so that unemployment benefits are no longer taxable income.

As automated labor continues to do more jobs formerly done by humans, unemployment insurance benefits need to be adjusted in favor of empowering unemployed workers to participate in the modern economy, not penalizing them for using any and all available resources to improve their condition.

Thank you,

YOUR NAME HERE

The problem of automation replacing human employment is real and it’s not going away. The 15 minutes you spend will be well worth the time invested.

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